How to create a business budget when you’re self-employed
Budgeting your business for lean vs. cash-rich months
Tips for managing your business’s cash flow
- Regularly assess cash flow statements and forecasts – Build cash flow projections as a part of your overall budgeting process to visualize how your money comes and goes. Consider 3-, 6-, and 12-month projections. Several software tools can help with broader analysis, or you can build a simple model in Excel.
- Consider all expenses in planning – Unexpected expenses can complicate your planning. Make sure you clearly define and consider all your expenses, including fixed and variable expenses.
- Establish clear payment terms – Large payment windows can create cash flow gaps, particularly if clients pay late. Send invoices early, and establish clear payment terms and dates, with penalties for late payments. Where possible, push for incremental payments based on project milestones to smooth cash flow.
- Set aside an emergency fund – Establishing an emergency fund to act as a buffer during slower times is vital. Continue to pay into it regularly—think about saving 5% of take-home pay, or enough to cover 3 to 6 months of essential expenses. Remember, freelancers and small business owners need enough funding to cover personal and business expenses in case of an emergency.